Many
investors view our current economic downtime as the perfect opportunity
to
purchase distressed hotel and motel assets at substantial discounts.
Before any
of these investors complete a purchase transaction, however, they
should add
one more item to their due diligence checklist: whether the hotel's
physical
property and operating procedures comply with the Americans with
Disabilities
Act (ADA), and similar state statues.

The last
decade has seen an explosion of private plaintiff lawsuits, including
class
actions and actions against individual hotels (and other properties
classified
as "public accommodations"), alleging violations of the ADA. In
states like California where ADA plaintiffs can recover actual,
punitive and
statutory damages, individual plaintiffs of the "sue-and settle"
variety have filed thousands of lawsuits claiming nearly identical
violations
at numerous locations.

DOJ
investigations:
In addition to private plaintiff lawsuits, the United States Department
of
Justice also has actively sought to enforce the ADA in the form of
individual
property investigations, geographical sweeps, and system-wide
investigations.

Individual
property investigations. A DOJ investigation
of an individual property often begins with a guest complaint at a
particular
hotel which is ignored or poorly handled by the owner or operator.
Matters
commonly escalate if the guest files a formal ADA complaint with the
DOJ's
Civil Rights Division. All complaints are actively investigated.

Geographic
sweeps. The DOJ has
also instituted
geographical "sweeps" such as the New York Times Square/Theater
District investigations from several years ago. This comprehensive ADA
investigation of 60 Times Square hotels - including boutique hotels and
international flag properties - was initiated after a single guest's
complaint.
It was a targeted investigation.

System-wide
investigations. The
DOJ has also
initiated a number of system-wide investigations against the nation's
leading
hotels and retailers. Over the years, the DOJ has litigated or
otherwise
negotiated Consent Orders or Decrees with other prominent hotel flags
such as
Ramada Ltd. (2010), Days Inns of America, Inc. (1999), Marriott
International,
Inc., Courtyard Management Corporation (1996), Motel 6 Operating LP
(2004 and
2007) and Bass Hotels and Resorts (1998). In November 2010, the DOJ and
Hilton
Worldwide, Inc. entered into a 45-page "comprehensive precedent-setting
agreement under the ADA that will make state-of-the-art accessibility
changes
to approximately 900 hotels nationwide."

What
it means to hotel investors
The current legal landscape has created a new reality for investors. It
is very
possible for an investor, when purchasing a hotel or motel, to buy
itself an
ADA lawsuit. The property may contain architectural barriers that
violate the
ADA and may give rise to a private plaintiff lawsuit and/or a complaint
to the
DOJ that leads to a DOJ investigation. The policies and procedures of
the hotel
operation may also be in violation of the ADA. (Procedures would
include items
such as online and third-party reservations, how to deal with service
animals
or how to ensure that the number of guest rooms which must be fully
accessible
are available.) It is also possible the hotel may be currently under
investigation by the DOJ, or is currently the subject of an ADA
lawsuit. We are
currently representing two buyers, including a foreclosure buyer who
inherited
a DOJ Consent Order or investigation.

Moreover,
substantial revisions to the Americans with Disabilities Act
Accessibility
Guidelines (ADAAG) were included in the DOJ's revised 2010 regulations
that
implement the ADA. These new regulations go into effect on March 15,
2011 (with
certain exceptions, and those go into effect on March 15, 2012). The
new 2010
standards impose both technical requirements, (e.g. the specifications
a
property must meet to be fully accessible), and scoping requirements
(e.g. the
number of rooms or elements in a facility which must be fully
accessible). It
is possible that a hotel that has been in compliance with the ADA in
the past,
will not be in compliance in the near future.

It is
imperative that an investor protect itself before completing a purchase
transaction, by performing due diligence in this area. For example, if
potential ADA violations exist, the investor can either require that
the seller
correct the problems as a condition of closing, obtain an estimate for
the
barrier removal and demand from the seller a credit in escrow or to
reduce the
purchase price accordingly. Prior to completing a purchase, the
investor should
consider performing due diligence in three broad areas:

Legal. Determine
whether the property is being investigated by the DOJ or if there are
existing ADA lawsuits against the owner or operator;

Architectural.
Retain an ADA consultant to survey the property and determine whether
architectural barriers exist; and

If
the property is in
California, the investor can also seek protection under California's
2009
Construction-Related Accessibility Standards Compliance Act which is
designed
to curb abusive ADA litigation through the Certified Access Specialist
program
(CASp). CASp enables business to go through a process to "certify"
that their facilities meet state and federal accessibility standards.
One
benefit CASp offers is that business owners with certification have the
option
to stay or stop all construction-related ADA litigation initiated
against them
in state court, and instead proceed to mediation, making it possible to
avoid
expensive and lengthy proceedings that drive up legal fees.

_______________________

Eudeen Chang is a
lawyer in
the Litigation Department of JMBM's Orange County office and a member
of JMBM's
Global Hospitality Group®. He represents hotel owners in a variety
of
litigation matters including hotel management agreement disputes, loan
and debt
restructurings, receiverships, and ADA defense. He is well-versed in
all
aspects of litigation, from pre-lawsuit strategizing to trial,
post-judgment
collection and through appeal. Eudeen conducts business in both English
and
Chinese (Mandarin). Contact Eudeen at EChang@jmbm.com
or 949.623.7232.
_______________________

Other
articles on ADA

If you
found this article of interest, you may want to check out some of the
other
articles on this topic on www.HotelLawBlog.com which can all be found
under the
"HOTEL LAW TOPIC" of "ADA" at the top of the home page (or
by clicking here)._______________________

This
is Jim Butler, author of www.HotelLawBlog.com
and hotel lawyer, signing off. We've done more than $60 billion of
hotel
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